Time is critical for New Mexico to diversify its economy
Commentary: New Mexico has the third-highest poverty rate in the nation, ahead of only Mississippi and Louisiana, according to the state Department of Workforce Solutions. But, while families throughout the state are struggling, the state government is more than flush.
The latest revenue estimate for the state projects that lawmakers will have an additional $1.6 billion to spend when they meet in January for a 30-day budget session. That’s money in addition to the $7.4 billion in this year’s budget. And, that budget did not include billions of dollars in federal relief funding, which the state Supreme Court has said must now be allocated by the Legislature, and not by Gov. Michelle Lujan Grisham.
Much of the increase is due to rising oil and gas prices. Pain at the pump for New Mexico drivers is always a good thing for the bean counters in Santa Fe. Revenue from both gross receipts taxes and income taxes were also higher than expected, reflecting a hike in both spending and wages.
That allowed the state to increase its reserves balances (unspent money) in the state budget to a healthy 35 percent, triggering the release of additional funds into the newly created early childhood trust fund and for state schools.
New Mexico legislators are quite familiar with the boom-and-bust cycles that come with a state economy that is so dependent on the volatile oil and gas industry. This year’s boom has been magnified by a massive infusion of federal revenue. But, much of that was one-time money that has already been spent, not recurring funds.
The urgency for our state to diversify its economy grows greater with each passing year, as climate change continues to deplete precious water resources throughout the west, not to mention its devastating impacts around the world. We have tied our children’s education to an industry that must be replaced soon.
Passage of marijuana legalization this year will help diversify our economy when stores open for the first time in April. But much more needs to be done.
Thus far, Gov. Lujan Grisham has proposed a modest decrease to gross receipts taxes and a pay increase for teachers. That’s nice, but it’s a far cry from the transformative plan that our state so desperately needs.
The Legislature has been riding these boom-and-bust cycles for so long that they have come to think of them as a natural part of the budgeting process - stick a bunch of money in reserves, start a new fund dedicated to this problem or that and then brace for the inevitable downturn. But even during the boom times for the state, families continue to suffer.
And, the booms won’t continue. For the sake of our planet, they can’t continue. Lawmakers need to start thinking like this one may be the last.
We’ve been nibbling at the edges with things like increased funding for job training or to recruit new business to move to the state. Those are fine, but we have the funding this year to do something much bigger, something that would transform and stabilize our economy moving forward.
I don’t know what that will be, but I do know there needs to be much more urgency in our search. This may be the last boom of this size, and the last chance lawmakers will have with this much revenue heading into a session to make transformational changes.
We can see the train coming. We need to figure out how to get off the tracks.